What is Just-In-Time Manufacturing?

All manufacturing organizations hope to contain the costs of production and get their products shipped as quickly as possible.

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Just-in-time (JIT) manufacturing addresses these concerns. It’s a system that targets reducing the times a product spends going through production and, at the same time, cutting back the response time from suppliers. Controlling the variables is the key to holding down production costs while increasing productivity.

Similar to lean manufacturing, JIT is designed to meet demand rather than create a surplus in anticipation of a future need. Its primary purpose is to eliminate the waste that comes from overproduction, waiting, and surplus inventory. Here are these wastes in a bit more detail:

Overproduction is manufacturing products in advance of or more than demand. It’s considered to be the
most severe of the wastes by proponents of just-in-time manufacturing because
it squanders time, space, and money, all the while masking the other problems
within a company’s processes.

Waiting to begin one process until another one finishes is
ineffective and a colossal waste of time. The flow of all operations should be
efficient and continuous. Some estimates claim
that more than 90 percent of a product’s time in manufacturing is spent
waiting!

Excessive inventory typically means that a company has ordered more than
the market demands or the demand falls dramatically after the inventory is ordered. Either way, it hurts business because it takes up space and must be managed. Companies often rid themselves of
excess inventory by selling it at a reduced
cost or tossing it out, either of which can lower
profits significantly.

Just-in-time signifies a major change in direction

In the past, manufacturers carried larger inventories of stock and raw materials just in case there was an increased demand for their product. Not surprisingly, that philosophy is often called just-in-case (JIC) manufacturing. Companies referred to this extra inventory as “safety stock,” and it forced them to manage this excess inventory and absorb a dent in their profits.

Ordering inventory as needed
means a business operates with low inventory levels at all times and does not
hold safety stock. The just-in-time manufacturing strategy lowers or eliminates
their costs to carry excess inventory, and
it decreases waste. But JIT does require manufacturers to do accurate
forecasting for the demand of their products.

The how, when, and why of just-in-time

Just-in-time manufacturing began in earnest
after World War II. Cash-strapped Japanese manufacturers began adopting the
system because they could not finance the large inventory production methods
that developed countries were using. They also lacked natural resources and available employees to take on large-batch
inventory production.

As a result, these manufacturers built smaller plants and quickly turned small amounts of raw materials into small batches of products or components. These smaller quantities allowed the manufacturers to generate maintainable levels of working capital while minimizing their financial risk.

While the original just-in-time concept is credited to Toyota (it was even called the Toyota Production System in the Western media), some argue that Japan’s shipyards successfully developed and implemented the approach first. No matter which of these was the originator, the idea was born from Japan’s post-war lack of cash, lack of space for large factories and inventory, and their lack of abundant natural resources.

News of the just-in-time
manufacturing technique reached the United States around 1977, and by 1980 most
of the developed countries had implemented some version of it.

JIT in practice

Just-in-time manufacturing seeks
to reduce non-essential costs and improve an organization’s return on
investment (ROI). But JIT is not a magical solution. It requires structure,
specific processes, and, most of all, discipline. And, it is not limited to controlling
inventory levels. Here are some of the other components of a complete JIT
system:

Improving quality by eliminating
defective work

Staying organized with excellent
methods of housekeeping

Smaller lot sizes

Reduced set-up time and flexible
approaches to changeovers

Uniform workload throughout the plant

Cross-trained workers that have
multiple skill sets

Streamlined movement of materials

Designing parts and components to
making processing simpler

Visual tools to improve overall
communication

Cellular manufacturing

Pull systems that allow workers
to pull in tasks as they are ready

Kanban system that matches
inventory to demand and reaches higher levels of quality and output

What can businesses expect after adopting just-in-time?

When companies put the proper time and effort
into implementing a just-in-time manufacturing system, companies can expect to
see a sweeping impact on their productivity, risk management, and operating
costs. Here are some of the benefits that manufacturers worldwide are
experiencing:

Drastically
reduced inventory levels

Lower
labor costs

Less
space needed to operate

Reduction
in work in process (WIP)

Improvements
in quality (fewer defects)

Reduction
in throughput times

Fewer
standard hours

Increased
number of shipments

Are there risks involved with just-in-time manufacturing?

For the most part, businesses that employ just-in-time manufacturing practices will see reduced cycle times, faster times to market, and reduced operating costs. But there are risks, especially for smaller companies. One supplier that experiences a breakdown and can’t deliver the materials that a company needs can disrupt or shut down the entire production process.

Also, a customer’s orders for products
could exceed the company’s forecasted expectations, which could delay the shipment of finished goods to several
customers.

To have the best
chance of success with just-in-time,
it’s critical that companies find suppliers that are either located close by or
can supply materials quickly and with little
advanced notice. It’s also important that these suppliers waive any
minimum order requirements that could hurt smaller businesses, which typically
purchase smaller quantities of materials.

Does just-in-time manufacturing work with an ERP system?

The short answer is “yes” since most manufacturers have overcome any inherent conflicts between enterprise resource planning (ERP) and just-in-time manufacturing systems and have meshed the two systems successfully. As mentioned, JIT does require manufacturers to be very accurate in their forecasts for the demand for their products. A quality ERP system is designed to do just that. Talk to an experienced ERP distributor to find out how your business can enjoy the benefits of both.